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What a Ponzi is and Why it Always Works

Updated on February 28, 2015

The Basics of a Ponzi

In all Ponzi schemes, whether investing in bonds, (that don't exist) or writing for online sites which promise high revenues (and don't pay); people are caught, and caught again, because the nature of the scheme is so seductive and there are so many people, "Just Like You" who have prospered.

The procedure is standard.

The results are also standard.

You will lose.


As Easy As 1 - 2 - 3

Every Ponzi has these features. For ease of explantion I'll use an online writing site I'll call Scribled.

This site promises to pay more than other sites.
There are dozens of people who flood the 'Net praising Scribled.
People are posting how they got their fifth pay out, or how they make $100 a week.

You react to these statements from People Just Like You.
After all, if they can make money like that online so can YOU.

This is Step One;

The Shill Game.

The Shill

There are two types of Shill; he who knows he is and is paid for the activity, and he who doesn't realise he is a Shill and is not paid for his endorsment and free advertising.

A Paid Shill gets a percentage of what the Ponzi takes. In the case of the writing site it began with one Shill who was announcing the existence of the site and how it paid more than the others on the day it was created.

He and the owner had written articles under different names, as well as copy and pasted great items from all over the 'Net but changed the name and did a tiny bit of revision.

The Dupes came on to Scrib seeing that there were 30 writers already on, and some great articles already posted, and some remarks in the margins...."This is the Greatest Site on the Net! I made $50 in two days!!!" (and stuff like that).

The Shill was paid a flat rate for every Dupe who joined And Posted.

After that, the Paid Shill was no longer needed because the Dupes, receiving that first payout became Shills.

How it Works

The first 100 Dupes who joined Scrib got paid. They got paid whether they wrote garbage or Pulitzer Prize. They weren't being paid for their work, they were being paid to bring in more Dupes.

These First Dupes (Group A) posted articles but also ran around the 'Net extolling the virtues of the site. They brought in a batch of new Dupes. (Group B)

And this is where the Ponzi actually begins.

Group B was paid, but of the 100 old Dupes (Group A) only half were paid..

Those in Group A were given stories to keep them churning out work, work which would
earn revenue which would be used to warm the pocket of the owner of the site.
But they would NOT be paid.

By this time, the Dupes of Group B had brught in in 10000 more Dupes. (Group C)
Half of Group B was not paid, (stories given to them).

Those of Group C were paid that first time, and went out and brought in more Dupes. (Group D)

Of those in Group A, B, and C the culling was done based on how many in Group D joined with their referral. The best Shill were paid, those who brought in no one were not.

When these unpaid persons complained they would be told they 'Broke The Rules' .

The articles written by those who were not paid in Group A/B/C were earning revenue which the Owner confiscated and used to pay those in Group D and then those in Group E.

The few in Groups A/B/C who were 'always paid' will adamantly defend the Site. Those in Group D who have brought in other warm bodies will be paid. All of those in Group E will be paid.

Now Group F arrives.

Considering how many people now belong to the site, only the most active Shills among groups A - E will be paid; that means 95% of them will NOT be paid. This is not a problem as the number of persons in Group F is great enough to outshout them.

Crash

This culling process, has nothing to do with the core; that is writing. It is based on how many dupes one brings in.

Often, the articles which get the most traffic have been confiscated by the owner, as the writer gets nothing.

The policy of the Site is that all Newbies get the first pay out, and nothing more.

As the Net begins to fill with disgruntled unpaid writers, and the Defenders find themselves also in the unpaid category, the balance shifts.

Sure, there were those who were defending Factoidz on the Day it closed, because people are stupid. And there will be Dupes defending the Next site they join, and the next as it goes down.

For all Ponzis go down.

They go down when the money taken in isn't enough to pay the Dupes. They go down when the Owner feels he's made enough and wants to move to something else. They go down when the wrong person is ripped off and a Lawsuit lands on the Owner's Desk.

But they go down.


Why They Always Work

Ponzis always work.

They work because Stupidity is Infinite.
They work because they always give that First Pay Out, expecting the Dupe to Reinvest.
They work because the Dupe who was paid yesterday will lure new blood in today, and keep investing, even when that 2nd Pay Out is late.

Psychologists can tell you that if people are told to follow a procedure and it works the first time, they believe that it doesn't work the second time for some personal reason; i.e. I didn't follow the procedure.

People will keep performing the procedure two, three, four more times without reward, because that first 'pay out' convinces them that it works, despite the fact it only worked 1 out of 5 times.

And because it worked that first time, they are Sure that this is right.

There is a Ponzi writing site running on the 'Net as I type. There are people defending that Ponzi, as I type. I know it is a Ponzi, so do others who got that 1st or 2nd pay out and then nothing more.

There are people who are owed Five or more pay outs, and are still writing.

Hence if Rippedoff posts; Scrib is a Ponzi! Do not Join! Depending on the time frame of the Ponzi and the position of the Dupe in the scheme, the attacks will be vicious and full of 'facts'

"I was paid four times!" Shouts a member of Group A who has been a worthy unpaid Shill.
"I was paid three times!" Types a member of Group B who survived the cut.
"I was paid twice!" Adds a member of Group C.
"I joined last month and was paid!" Types a member of Group D.

Next month, however, at least two of those people will not be paid, and when the Ponzi has had enough and closes the site those Dupes will join another site and be Duped again.

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